Analyst: 2018 should be a good year for Sonoma County wineries, grape growers

Rob McMillan, Executive Vice President and Founder of Silicon Valley Bank's wine division, speaks to the crowd during the Dollars and Sense Seminar and Trade Show at the Luther Burbank Center for the Arts in Santa Rosa, on Thursday, January 11, 2018. (BETH SCHLANKER/ The Press Democrat)
January 11, 2018

BILL SWINDELL,

THE PRESS DEMOCRAT

The North Coast wine industry will enjoy another successful year, though storm clouds are on the horizon as growth slows and competition increases from imports and other domestic regions, an industry analyst predicted Thursday.

“I think 2018 is going to be a great year,” Rob McMillan, executive vice president of Silicon Valley Bank’s wine division, said Thursday in a presentation to the Sonoma County Winegrowers, a trade group representing local grape growers.

Sales of premium wines rose an estimated 4 percent last year, McMillan said at the growers’ annual Dollars & Sense conference, held at Luther Burbank Center for the Arts. That is welcome news for grape growers in Sonoma and Napa counties, the top producers of premium wine in the United States.

Growth, however, has slowed significantly from the rates seen earlier this century, such as the 28 percent increase in 2000.

The slowing growth rate comes as the wine market shifts away from baby boomers, who are being replaced by cash-strapped millennials who tend to like sweeter wines and are drawn to value purchases at retailers like Costco and Total Wine.

“This is a very long-term business. If we don’t get ahead of pending changes, then we are caught behind on the curve,” McMillan said.

While overall wine shipments to wholesalers are slowing, wineries in some areas outside the North Coast — including Oregon, France and New Zealand — are seeing faster growth. For example, sales of Oregon wines priced above $9 a bottle jumped almost 18 percent last year, buoyed by its popular pinot noir regions, while sales of French wine increased 16 percent, largely driven by the continued popularity of rosé wine.

“Oregon is doing really well with pinot noir. They are a direct competitor of what is happening in Sonoma,” McMillan said.

The average winery receives 62 percent of its revenue from selling directly to consumers, largely through its wine club. But MacMillan said wineries must stop overly relying on tasting room visitors. Instead, he urged them to ramp up efforts to sell wine digitally by improving their visibility in Google searches and expanding their presence on social media to link with key influencers in the wine world.

“If we are only limiting ourselves to people who are largely coming to our tasting room, (then) we’re largely forgetting the other 50 states. The consumer is not the wine club. Your customer is the wine drinker,” McMillan said.

Sonoma County Winegrowers, which represents more than 1,800 grape growers in the county, made strides last year in its quest to have all local vineyards certified as sustainable by 2019. At the end of 2017, 72 percent of the county’s vineyard acreage had been certified as sustainable through an independent audit, up from 60 percent a year ago.

The trade group contends that wineries are willing to pay more for grapes labeled sustainable because they can then sell higher-priced wines to environmentally conscious consumers.

It introduced a new logo Thursday that wineries can place on their labels designating that the wine was made from sustainably farmed grapes. Ferrari-Carano and Dutton Estate wineries are using the logos on their 2017 vintages in a pilot project for the campaign.

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.